The African Development Bank (AfDB) in partnership with the Climate Investment Funds (CIF) has commissioned the Coalition for Green Capital (CGC) to prepare a study on the creation of national climate change funds and green banks in Africa.
The CGC, the non-profit that incubates local clean energy finance institutions, will identify and work with six African countries to conduct feasibility studies for the project, which was initiated at the Green Bank Design Summit held in Paris in March 2019. The Summit tasked 23 developing countries to craft a new model to mobilise and accelerate investment in clean energy.
Andrea Colnes, director of global green bank development at the CGC, noted: “For countries to better access climate finance and fully engage the private sector, the climate finance system must reorient toward national financial capacity that is able to channel capital to projects and markets where it is needed most.”
When paired with effective grant programmes through National Climate Change Funds and strong enabling environments and policies, locally-based green banks are powerful tools to address market needs, understand local risk and drive private investment. Dr Anthony Nyong, the Bank’s director for climate change and green growth, welcomed the collaboration.
Nyong said: “Green financing vehicles are increasingly recognised as a powerful instrument to mobilise private sector capital for low carbon and climate-resilient development. Their ability to access even limited amounts of local currency finance presents significant opportunities to manage risk, attract concessional finance from climate funds and crowd in private sector finance.”
Momentum in green banks is growing around the world. Jeffrey Schub, executive director at the CGC, believes the core value provided by green banks is similar whether on a city-, county-, state-, or entire country-scale. “Public dollars available for investment in green energy projects are limited, and policy-makers, of course, want to maximise the impact of each dollar of investment,” he said.
“Green banks accomplish this in a unique way, blending public, private and philanthropic investment in clean energy projects that would otherwise struggle to find capital. Green banks can also help to meet needs in hard-to-reach markets, such as those serving low-income customers.” Green banks and national climate change funds can play an important role in mobilising finance to support low-carbon, climate-resilient development, using methods such as blended finance to drive increased private investment. Countries can mobilise funds from the diaspora, national financial institutions, private investors, asset managers, sovereign wealth funds, and more.
These instruments and funds can support the implementation of Nationally Determined Contributions (NDCs), CIF Investment Plans, CIF Strategic Plans for Climate Resilience and NDCs, and progress towards Sustainable Development Goals (SDGs). ESI